What is the process like of buying a rental property out of state?

Question

I understand that I would have to hire a property management company.

I don't know much about this process. How difficult is it, and what exactly is involved?

I wouldn't be able to get much ROI where I currently live.

Brett Deas · Answer

Not hard at all. Majority of my companies properties are all a few states away. It takes a while to learn about the market and which areas are good and bad since you don't live there. But the only thing that really changes is you use your phone more. You see it all through facetime and things, but the realtor still does their job, so does the lender and the inspector and everyone else in the transaction. The process doesn't inherently change due to the distance.

Eric Fernwood · Answer

Hello @Nick Tarantino,

“Live where you like but invest where you can make money.”

There is a straightforward process for successful investing, similar to peeling an onion. See the image below.

Location

The first and most important decision to make when investing is choosing the right location, not the property itself. (For more details on this process, please post your questions or reach out to me directly.) There are several criteria that a location must meet, and below are three of them:

• Rent growth must keep pace with inflation. Every time you go to the store, it requires more and more dollars to buy the same basket of goods. Unless rents keep pace with inflation, you will not have the additional dollars you need, and your only option will be to continually decrease your standard of living.
• Metro population greater than 1 million. Small cities tend to be too dependent on one industry or one major employer. Your financial future is tied to this location, so it's important to choose one that will be stable over the long run.
• Increasing state and city population. If the population of either the state or the city is static or declining, demand for housing will not increase. Unless demand increases, prices and rents will not increase.

Investment Team

Everything you learn from podcasts, books, seminars, and websites is general information. You will buy a specific property in a specific location in a specific condition subject to specific local regulations. The only source for the hyper-local information you need is a good local investment team.

An investment team has probably delivered hundreds of investment properties. They already have all the skills, contacts, processes, and services you need to be successful. No matter how hard you try, you cannot duplicate the years of experience of a team of experts. Plus, working with an investment team costs no more than working with any other realtor.

If you cannot find a good investment team, look for another location.

Tenant Segment

The property is no better than the tenant who occupies it. If your goal is to get off the treadmill and stay off, you need a reliable income stream. The only way to achieve this is by having a “good” tenant continuously occupying your property. I define a good tenant as someone who stays for many years, pays rent on schedule, and takes care of the property.

However, good tenants are the exception, not the norm. To increase your chances of finding a reliable tenant, you need to find a tenant segment with a high concentration of good tenants. You can do this by interviewing multiple local property managers.

Property Selection

You have identified a tenant segment that has a high concentration of good tenants. If you want this segment to occupy your property, find out what and where they currently rent (again by interviewing multiple property managers) and then purchase similar properties. By allowing your target tenant segment to make all decisions about the property, your chances of success are high.

Summary

To keep this post brief, I will stop here. It is important to understand that consistently acquiring dependable passive income properties does not require luck, the opinions of others, or guesswork. It is a straightforward process with metrics at each decision point, so you can be confident that you are making the right decisions.

If anyone would like more details or have questions, DM me for a free guide that I wrote up to explain my investment methodologies and processes.

Kerry Noble Jr · Answer

I work with out of state/country investors here in my market.....bringing value to them on all levels.

build you team....financing....realtor....construction....boots on the ground....PM and then find the deals.

Mohammed Rahman · Answer

Hey @Nick Tarantino - you don't necessarily even need a PM as long as you can have a network of people in the area that you're investing in. Most of the time, this will come in handy when you're able to find an investor friendly agent.

What is the process like of buying a rental property out of state?

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